Mega Projects Seen To Boost Ei Hotels

JM has forecast a strong outlook for EI Hotels, which has several mega-projects lined up through expansion plans.

EI Hotels is planning a joint venture with Mexx group of The Netherlands to set up four hotels in Indonesia and one each in Egypt and Mauritius.

The company is also on the verge of bagging the prestigious golf cum resort project at the Nhava Sheva port in Mumbai. A hospital project at Noida is also on the cards. A significant part of the company's investments are being made for joint ventures and associate companies would be undertaking the projects.

The company recorded a 46 per cent higher income in financial year 1996 to Rs 421 crore and net profit moved up by 107 per cent to Rs 120 crore in the same period. After the increased room realisation, depreciation of the rupee and cost control measures, EI Hotels has witnessed significant improvement in operating margins from 30.7 per cent to 37.4 per cent.

"Being dependent on the rupee-dollar movement, the scrip should gain from any depreciation of the rupee," the JM report states.

The company has raised Rs 120 crore through a global depository receipt (GDR) offering earlier and it is keen to tap the markets again with a second GDR issue.

According to the report, though the resources would be sufficient to finance the above expansion plans, EI Hotels would resort to external financing in the Nhava Sheva and other projects.

The company's main hotels in Mumbai and New Delhi have been recording over 85 per cent occupancy even at the increased room tariff which has resulted in better operating margins at 37.4 per cent. Interest expense was lower by 9 per cent at Rs 15.9 crore.

According to JM report, EI Hotels was planning to hive off its flight catering division to a joint venture with Eurest International.

The air catering division contributed around Rs 12 crore in the financial year 1996.

Being a low margin business, the effect of the disinvestment will be marginal on the bottom line.

In 1997, it is expected to receive a boost from the increase in tariffs effected in April 1996. Further improvement in occupancy would be hard fetched which would

slow down the earnings growth tempo.